Hi all,
I have a question that I'm hoping you all can help me out with
Background:
I came out of school about 4 years ago and started my career in public accounting. In June of this year I left to take on a more lucrative position. Last night I received the letter detailing my options for the firm's pension program, in which I am 100% vested due to my years of service. I was going through the scenarios and need some advice.
Terms:
Lump sum now of $6,716 or monthly benefit of $838 starting in November 2051 (when I'm 65 - am currently about to turn 28)
My questions:
1) I ran the cash flow analysis assuming that I live to 90 (which may be optimistic? Right now I'm only 28, fit and in good health, but probably too early to tell if there'd be anything big that could spring up), and it seems that if I assume 8% or more annualized return, the lump sum looks to be a better option (I got $735k monthly vs $793k lump sum using 8% and $636k vs $446k, respectively, using 7% - but please check my math on this), 8% seems to be pretty safe, but it's close enough to make me rethink my decision - a guaranteed single life annuity is always nice. (P.S. it really shocked me that a corporate firm would use such a high rate of return, unless of course my math is wrong)
2) The thing I worry about is that the pension will not be solvent by the time I'm eligible for the payments if I do take the monthly payment. Even though this is a multi-national accounting firm, accounting is an industry at the whims of regulatory agencies and the public trust, and I don't have a crystal ball to tell me whether the firm will continue to fund its pension adequately in the coming years.
3) This is peripheral but I also have the option of 5 year certain/life ($824), 10 year certain/life ($786), and 15 year ($740) where if I perish before those time periods, my beneficiary will continue to receive benefits for the rest of the period - I've currently been very generous in projecting 25 years of life after I turn 65, so I wonder if the 15 year option might be worth it - probably not
Thoughts? Questions? And thank you very much for taking the time to read this question